KORUS FTA to give green light to Korean economy
Oct 28, 2011
Since June 2006, Korea and the United States have been engaged in negotiations over the Korea-U.S. Free Trade Agreement (KORUS FTA).
Four years later, on October 12, 2011, a turning point came in the prolonged talks as the U.S. Congress ratified the free trade pact.
Under the free trade agreement, approximately 61 percent of the world will become Korea’s economic territory in terms of gross domestic product (GDP) as the country will have free trade agreements with all three of the world’s largest economic blocs -- the United States, the European Union (EU), and the Association of South East Asian Nations (ASEAN).
The free trade pact will help expand the trade volume between Korea and the United States, create more jobs, and strengthen the industrial competitiveness of the two countries. The trade agreement will have a mutually beneficial effect on security and diplomatic relations between Korea and the United States.
|(Left) U.S. customers look at Korean TVs displayed at the Consumer Electronics Show (CES) in Las Vegas earlier in 2011; (right) Korean workers examine LED lighting products at an LED production line (Photos from the Weekly Gonggam Magazine).|
* KORUS FTA to bring job creation, price stabilization
The KORUS FTA is expected to have a tremendous impact on the Korean economy, according to research by Korea’s state-funded research institutes like the Korea Institute for International Economic Policy.
The free trade pact is predicted to account for more than five percent of the GDP and generate 350,000 jobs in Korea.
Korean consumers can also enjoy the benefits of free trade. They will be able to purchase various quality goods at lower prices, as cheaper U.S. goods will be imported to Korea.
The trade pact will also expand bilateral trade volume. Within the first 15 years of the trade pact, Korea’s exports to the United States are forecasted to grow each year by nearly $1.29 billion and its imports from the United States will grow by $1.15 billion on average, according to the Korean government.
The agreement will also improve Korea’s economic system, which needs to meet the global standard and its related laws in order to conclude the trade pact.
It is not hard to imagine how much economic effect the KORUS FTA will have on Korea when looking back at previous free trade pacts the country concluded with other countries. Since the Korea-Chile FTA took effect in 2004, by 2010 Korea’s exports to Chile have risen by more than 460 percent and its imports to the country rose by 218 percent compared with those corresponding figures before the trade pact.
In the case of Singapore, Korea’s exports to Singapore recorded a 106-percent increase and its imports to Singapore rose 48 percent after the Korea-Singapore FTA took effect.
* KORUS FTA will help Korean firms gain competitiveness in U.S. market
Experts say the LED (light-emitting diode) lighting, car parts, and the textile industries are some of the sectors that will benefit from the KORUS FTA.
Korea’s LED industry has been growing since 2009. Once the KORUS FTA takes effect, the United States will immediately lift a 2.6-percent tariff on Korean LED products.
In fact, Korea’s LED exports to the EU showed a sharp increase when the Korea-EU FTA took effect. This is because the EU immediately removed a 4.7-percent tariff on Korean LED products. The EU’s energy-saving campaign also helped the rise of Korea’s exports to the region.
The car parts sector is also expected to enjoy the benefits of the KORUS FTA. The car parts industry is one of the six sectors that the free trade pact will help increase exports to United States, according to the Korea Trade-Investment Promotion Agency (KOTRA). Three types of car parts are included in KOTRA’s list of ten most promising exports which will enjoy the benefit of the free trade pact.
Among the three listed car parts, brake pads are the most promising item to record profits through the free trade agreement. Last year, Korea’s brake pad exports to the United States recorded $270 million. Once the KORUS FTA takes effect, the United States will lift a 2.5-percent tariff, so the Korean car parts industry can expect higher profits.
|(Left) people look at textile products on display at the International Textile Fair held in Daegu in 2010; (right) the car parts industry is one of six industries that will benefit from the KORUS FTA (Photos from the Weekly Gonggam Magazine).|
Korea’s textile industry is another sector which will benefit from the KORUS FTA, along with the car parts and machinery sectors, as the United States will either lift or lower its tariff on Korean textile items.
Three textile exports, including polyester fibers and car mats, are included in KOTRA's list of the ten most promising exports which will enjoy the benefits of the free trade pact.
By Yoon Sojung
Korea.net Staff Writer
Article adapted from the Weekly Gonggam Magazine
Department Global Communication and Contents Division